Buying a forward rate agreement (FRA) is analogous to buying a call and selling a put option.

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Buying a FRA is analogous to buying a call option because it gives the buyer the right, but not the obligation, to buy a certain amount of a currency at a specified price on a specified date. Selling a put option is analogous to selling a FRA because it gives the seller the obligation to sell a certain amount of a currency at a specified price on a specified date.

Buying a Forward Rate Agreement (FRA) Is Analogous to Buying